Money Mondays: Why Homeownership Is More Important Now Than Ever Before

The broader housing market has been on fire lately. We have seen housing prices in cities across the country rise very rapidly, and in many cases, this trend has made housing unaffordable. Construction has not been able to keep up with demand for houses in numerous zip codes. But the positive news in the housing sector over the last 8 years since the correction has been hiding an ugly truth: Black Americans have been largely left behind. A report released from Harvard University details why there has been a disparity in the housing recovery.

What does this report tell us?

First, it details the factors that caused the Black community to be disproportionately impacted by the housing market correction in 2008. During the creation of the housing bubble, our community was aggressively targeted for subprime and predatory loans. Then, despite the broader economic recovery since the great recession, higher unemployment rates and slower wage growth than other racial groups have remained a problem for Black Americans.

\What else does the report cover?

This report also outlines what the disparities in the wake of the housing recovery look like. It found housing prices have not rebounded in our communities as they have elsewhere. While average 2016 home prices in the U.S. surpassed the peak reached before the correction, in low and moderate-income neighborhoods home values are still significantly below their pre-crisis highs.

And while other racial groups are once again seeing homeownership rates on the rise, for Black America, the rates have stagnated. Last year, the difference between the Black homeownership rate and the white homeownership rate was the largest seen since World War II. This is important because home ownership accounts for a larger portion of overall Black wealth than it does for other groups.

What steps can we take to rebuild rates of Black homeownership?

While there are obviously outside factors, we can begin to grow the rates of Black home ownership, and Black wealth, again with the help of sound financial decision-making when it comes to housing. First, remember that your monthly housing expenses should not exceed 30 percent of your take-home pay. For homeowners, this percentage includes your mortgage and insurance, and maintenance cost. If you are renting, it includes monthly rent and insurance.

Second, remember a home’s purpose is to shelter. While buying a home is an investment, a house is primarily a place to live. If you want to save for retirement or your kid’s college, there are better investment options.

Finally, if you are in the market for a house, calculate your price-to-rent ratio. Take the total purchase price and divide it by the total annual cost to rent a home or apartment in that same neighborhood. If the sum is under 15, you can consider moving forward. If it is over 15, you might want to rethink the purchase.